Berlin In view of the current economic situation, the future prospects for start-ups are also becoming noticeably gloomier. This emerges from the new German Startup Monitor (DSM), which is available to the Handelsblatt in advance (to download). The German start-up association, in cooperation with the auditing company PwC, surveys almost 2000 start-ups every year about their economic situation and political attitude.
At the moment, around half of those surveyed rate the business situation as positive. However, the view into the future is much more pessimistic than in the last survey in 2021. Almost 54 percent of the start-ups expect a positive development – last year it was significantly more with around 72 percent.
“This makes it clear that the current economic challenges have also arrived in the start-up ecosystem,” says the DSM. With a view to the coming months, the business development for many founders is characterized by uncertainty.
Two points come more into focus: financing and personnel development. Both points see more start-ups as challenges than last year.
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While a year ago many investors were still euphorically investing in new business ideas, financiers have now become much more cautious. While deals worth more than 105 billion euros were closed in Europe last year, according to estimates by the industry analyst Pitchbook, it will only be around 54 billion euros this year.
The co-founder of digital asset manager Scalable Capital, Erik Podzuweit, is also observing this development. The big funds would wait and see how the geopolitical situation develops, he believes. “Whoever has to raise capital has a hard time,” sums up Podzuweit.
The DSM shows that many start-ups will need financing in the near future. More than two-thirds of the companies surveyed plan to raise money during the year. The average capital requirement is 3.1 million euros.
Scalable Capital itself completed a financing round in the summer of 2021 and therefore does not need any new money, explains Podzuweit. But he has become cautious on the spending side. “Since nobody knows how long this tight funding situation will last, we only spend money if it improves our product.” Marketing costs, for example, are a good way to save money, he advises.
Prolonged capital doldrums
Christoph Schuh, investment partner at the finance company Lakestar, does not expect the general investment climate to improve in the short term over the next twelve months. “The lessons learned from the years 2000 and 2008 are that the investments of venture capitalists in Europe drop for about twelve to 18 months after a peak before picking up again,” analyzes Schuh. But Lakestar also sees this phase as an opportunity to secure and invest in the best start-ups now. “Up until now, the best start-ups have always emerged in times of crisis,” he says.
The good news for female founders at the moment is that investors want to continue investing in good business models despite the current situation. Dominik Stein from EQT Growth sees good financing opportunities for products that are either very different or far superior to the competition.
And Thomas Oehl, Partner at Vsquared Ventures, thinks it’s right that the market is cooling off a bit. The ratings of the start-ups were “simply no longer realistic”.
Besides funding, another big unknown for startups is the search for new talent. 34 percent of the founders surveyed in the DSM rate personnel planning as a challenge – two years ago it was just 17 percent.
Despite the more tense economic situation, the start-ups plan to hire an average of 9.2 new employees in the future – in 2021 this figure was still 8.6. According to the start-up association, nine out of ten start-ups had advertised vacancies in April.
In the technology sector in particular, the newly founded companies are courting talent, some of which they have to recruit from abroad. Half of the founders therefore stated that they had previously foregone growth due to a lack of staff.
Greens expand lead
According to the DSM, the start-ups are assuming that the Greens in particular can help to best deal with their problems on the part of politics. With 50.8 percent approval, the eco-party gained an absolute majority among the founders and increased its lead over the second-placed party FDP (26.4 percent) clearly stand out.
The liberals lost favor with the founders: their value fell by five percentage points compared to 2021. The CDU (ten percent) and the SPD (5.9 percent), on the other hand, expressed their trust in only a few start-ups.
The urgent request to politicians is, above all, to simplify administrative processes. Nine out of ten start-ups saw this as an important lever for strengthening the start-up ecosystem. This was followed by the simplification of public procurement to give start-ups easier access.
Good news from this year’s DSM is that the proportion of women founding companies has continued to grow. It is currently 20.3 percent (2021: 17.7 percent). Nevertheless, the conclusion of the start-up association is not too enthusiastic: “Women are still greatly underrepresented and the existing potential is not yet being fully exploited.”